Claire T. Manning

“Mutual” will with third wife fails to defeat fourth wife’s omitted spouse claim

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Early in my career, I practiced briefly in the area of estate planning. I attended week-long seminars and poured over tax laws. I even drafted a few irrevocable trusts for wealthy clients. But I was also representing real estate developers, and, at some point decided that I couldn’t keep up in both areas. So, I dropped estate planning in favor of real estate.

But real estate lawyers need to know enough about estate planning to figure out who gets the real estate at the death of the owner, so the two areas often overlap, and I was often thankful I had a background in estate planning.

I found a recent Court of Appeals case involving an omitted spouse claim by a fourth wife fascinating. Ward v. Ward* involved a mutual will and related documents between Stephen Ward and his third wife, Nancy.

The spouses generally intended that the death of one would cause their assets to “pour over” into a trust controlled by the other. After the death of the surviving spouse, any remaining assets would be disbursed among each spouse’s children and heirs as detailed in their wills and trust documents. Both parties agreed that they would not amend the documents after the death of the first spouse.

Those documents were executed in 2005. Nancy died in 2011. Later that year, Stephen began dating Mary, and they married in 2013. At the time of marriage, Stephen was 69 and Mary was 88. Stephen died in 2016.

After Stephen’s death, his children sought to probate his estate, and Mary filed a petition seeking to have herself declared an omitted spouse.

Several witnesses testified that Stephen’s intent when he executed the estate planning documents was to have those documents enforced as written, and that his estate plan would not be altered by a subsequent marriage.

The Court of Appeals agreed that a testator’s intention, as expressed in his will, governs the construction of the will if it does not conflict with law or public policy. But the Court held that the testator’s intent must fail when it conflicts with the probate codes’ protection of a surviving spouse.

Mary had only to prove that Stephen’s will was executed prior to their marriage and that it did not provide for her. Her claim to an omitted spouse’s share was affirmed.

Justice Geathers dissented, stating that the only evidence in the present case shows that years before he met Mary, Stephen made it clear that he meant to leave a subsequent spouse nothing.

Interesting case! I wonder whether our Supreme Court will have the chance to weigh in.

*South Carolina Court of Appeals Opinion 6073 (July 24, 2024).

Court of Appeals tackles basic real estate issue

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Last week, this blog discussed a South Carolina Court of Appeals case involving the rule against perpetuities. This week, we look at the Court’s take on another basic real estate issue, King’s and sovereign grants. East Cherry Grove Co., LLC v. South Carolina* involves a dispute over dock permit over tidelands properties in North Myrtle Beach.

Matt Leonhard applied to DHEC for the permit over tidelands property adjacent to his property. East Cherry Grove Co., LLC and Ray & Nixon, LLC (collectively, Respondents) claimed they each owned a portion of the tidelands property, and the Circuit Court agreed.

The State of South Carolina appealed, making several legal arguments, including ownership by the State of navigable waterways, and the propriety of testimony by a real estate lawyer as to title even though he was not a surveyor.

At the Circuit Court’s bench trial, four King’s and sovereign grants were admitted into evidence. William Deschamps, a real estate lawyer, testified he searched the titles of the respective properties back to the grants. He testified he had no doubt that the properties were subject to the grants based on all the survey information and his review of the titles. On cross examination, he admitted he was not a surveyor and clarified that he was not rendering a surveying opinion but was basing his opinion on his title examinations after reviewing the grants in conjunction with the surveys.

A surveyor also testified and was asked if the property in question came from the grants. His response was, “There’s no other place it could have come from.” 

The Circuit Court ruled that the Respondents met their burden of proof by a preponderance of the evidence that they owned their respective properties by virtue of the Grants. On appeal, the State argued that a clear and convincing standard should have been applied instead. The Court of Appeals agreed with the Circuit Court, stating that our case law provides that the State possesses presumptive title of tidelands property, and the person seeking to establish private ownership must present evidence to rebut the presumption.

The Court of Appeals agreed with the State, however, as to small portions of the East Cherry Grove tract that were outside of the grants.

The State argued that the titles should have been based on a particular plat rather than the plats relied upon by the Respondents because of the specificity of the State’s preferred plat. The Court of Appeals concluded that the Circuit Court had not erred in weighing all the evidence of title.

For simplicity, I’m omitting other issues that were argued but failed. Please read the case in its entirety for an interesting discussion of testimony in a real estate case.

*South Carolina Court of Appeals Opinion 6068 (July 3, 2024)

We have a new rule against perpetuities case!

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Dirt lawyers have been known to joke that after decades of successfully practicing real estate law, they have never encountered a true rule against perpetuities situation. Here is one such situation that arose in Columbia and made it to our Court of Appeals this year.

Spring Valley Interests, LLC v. The Best for Last, LLC* involved a perpetual option to purchase a 74.425% undivided co-tenancy interest in real estate located in Columbia.

In 2017, Spring Valley’s predecessor, White Interests Limited Partnership, entered into an agreement with Best through which White loaned Best $800,000. Best used the loan proceeds to purchase the property. As a part of the consideration for the loan, Best granted White the freely assignable perpetual option. The language of the option contains no termination date other than a statement that Best would exercise the option at its sole discretion by delivery of a written notice no later than thirty days before the intended closing.

White assigned the option to Spring Valley, and in 2019, Spring Valley sent Best a letter exercising the option. Best objected to the purchase of the undivided co-tenancy interest and, instead, insisted that Spring Valley exercise the option by becoming a member of Best. The parties negotiated and nearly came to an agreement except for Spring Valley’s insistence on certain attorneys’ fees.

Spring Valley filed a complaint seeking specific performance of the option. Best filed an answer asserting defenses including that the option was void because it violated the common law rule against perpetuities. Spring Valley asserted that our common law rule was preempted by our statutory rule against perpetuities (S.C. Code § 27-6-10, et seq.), which became effective in 2007.

The common law rule mandates that any interest not certain to vest within a life in being plus 21 years is void. The statutory construction provides for a ninety-year wait-and-see period that would likely save otherwise violative transfers. The statutory construction states that it supersedes the common law rule, but also states that it does not apply to nonvested property interests arising out of nondonative transfers.

Best eventually filed a motion for summary judgment, which the circuit court granted, stating that the statute does not apply to nondonative transfers and, therefore, cannot replace the common law; thus the common law is the appropriate legal standard to conclude that the option is unenforceable. The Court of Appeals affirmed.

The Court of Appeals stated that most states that have adopted a form of the uniform rule seem to conclude that such adoption removes commercial transactions from the common law rule and the uniform rule. But South Carolina was the first state to adopt a form of the uniform act, and the Court said it cannot say with certainty that the abolishment of the common law rule was the legislature’s intent at the time.

Also, according to the Court, the complete abolition of the common law rule without some provision for limitations in commercial transactions risks putting two legal principles at odds—freedom to contract and restrictions on alienability.

Since the Court believed it could construe the statutory construction in a manner that preserved the common law, it affirmed the lower court’s ruling finding the option void under the common law.

I would not be surprised to see this case go to our Supreme Court.

*South Carolina Court of Appeals Opinion 6070 (July 10, 2024).

The State reports Zillow is suing Richland County

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The State newspaper reported on July 2 that the home-buying site Zillow is suing Richland County. The claim is that the County is violating public records laws by failure to reply to a Freedom of Information (FOIA) request for property tax data.

The article reports that in May, Zillow requested property assessment data from Richland County by submitting multiple FOIA requests. The County first responded that it did not have any records matching the request. Then, the County denied the request because the requested information is available online and argued that state law does not require the County to create new documents to fulfill a FOIA request.

Zillow argued, according to the article, that not all the assessment information for every parcel in the County is available online. Zillow had apparently requested an electronic copy of the assessment files for all the parcels instead of the option to search parcels one by one. The company apparently didn’t want to have to search titles in the manner of South Carolina real estate professionals.

Zillow also argued that it had received the requested information in prior years. Before 2022, the company said it had received the assessment date from the County each year in the format the company requested, which was an electronic file that contained all assessment information. The lawsuit claims the company paid about $8,800 per year for that information.

Zillow is now suing for the requested information and demanded that the County pay Zillow’s legal fees if the lawsuit is successful. We’ll see what happens with this one!

SC Legislature provides fix for MV Realty problem

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This blog has previously discussed MV Realty, as title examiners reported finding “Homeowner Benefit Agreements” or “Exclusive Listing Agreements” filed in the public records as mortgages or memoranda of agreement. The duration of the agreements purported to be forty years, and searches revealed hundreds of these unusual documents filed in South Carolina. The documents state they create liens against the real estate in question.

The company behind these documents is MV Realty PBC, LLC which appeared to be doing business in the Palmetto State as MV Realty of South Carolina, LLC. The company’s website indicated the company would pay a homeowner between $300 and $5,000 in connection with its Homeowner Benefit Program. In return for the payment, the homeowner agreed to use the company’s services as listing agent if the decision was made to sell the property during the term of the agreement. The agreements typically provided that the homeowner may elect to pay an early termination fee to avoid listing the property in question with MV Realty.

The company has been the target of litigation and legislation in many states, and, thankfully, Governor McMaster signed South Carolina Code §27-28-10, et seq., into law on May 20. This legislation effectively bans these long-term listing agreements.

The legislation defines a real estate service agreement as a “written contract between a service provider and the owner or potential buyer of residential real estate to provide services, current or future, in connection with the maintenance, purchase, or sale of residential real estate.” Under the new law, a real estate service agreement is “unfair” and void if it is intended to be effective for more than one year; 1) expressly or implicitly purports to run with the land and bind future owners of the property; 2) allows for the assignment of the services contract without notice or consent of the owner; or 3) creates a lien, encumbrance, or security interest on the property.

Under the legislation, any recorded unfair real estate services contract is no longer effective as a lien, encumbrance or security interest against property. The recording of this type of document no longer serves as constructive notice to any interested party in the real estate. And no additional filing is necessary to void the unfair agreements or to clear the public records.

Further, the property owner of the real estate may collect actual damages, costs and attorneys’ fees resulting from the filing of the contract. Such contracts are expressly stated to be in violation of the South Carolina Unfair Trade Practices Act.

Contact your friendly title insurance company underwriter if you have questions about these documents, but these documents should no longer create title problems for South Carolina dirt lawyers. Some things do work out as they should!

Department of Justice can reopen investigation of National Association of Realtors

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I was in Washington D.C. last week with one husband and four grandchildren under 12. To see as much as we could, we walked about ten miles per day. One day, we passed the Department of Justice and the National Association of Realtors. Coincidentally, on that same day, I received word from the Chicago Title office in Columbia that the D.C. Circuit Court had ruled that the DOJ’s Antitrust Division can reopen its investigation against the NAR.

This investigation dates back to a 2005 lawsuit challenging the NAR’s operation of its multiple-listing services (MLS). The suit claimed that internet competitors and their clients were blocked from having full access to listings. This practice, the lawsuit claimed, reduced competition and kept real estate agents’ commissions high.

The parties entered into a settlement in 2008, which expired in 2018. The DOJ began its investigation again and issued two subpoenas to the NAR. One subpoena sought information about the NAR’s “participation rule” which requires listing brokers to offer the same commission to all buyer brokers using the MLS. The other subpoena sought information about the NAR’s “clear cooperation policy”, which requires listing brokers to post properties on the MLS within one day of the beginning of marketing. The DOJ claimed both policies limited competition.

In 2020, the parties agreed to a Consent Judgment. This document contained a reservation-of-rights provision that allowed the DOJ to continue to investigate and bring additional litigation. The settlement documents did not mention the participation rule or the clear cooperation policy. But the DOJ sent a letter to the NAR stating it had closed its investigation into those two rules and that the NAR was not obligated to respond to the subpoenas. The letter contained a no-inference clause providing that no inference could be drawn from the closing of the investigation.

In 2021, after unsuccessfully attempting to renegotiate the reservation-of-rights clause, the DOJ withdrew the Consent Judgment. The DOJ also dismissed the complaint and issued new subpoenas. The NAR petitioned the Circuit Court to set aside one of the subpoenas on the grounds that it breached the settlement agreement. The Court agreed. A two-judge panel of the Court reversed, relying on the “unmistakability” principle, which requires courts to refrain from interpreting a contract to cede a sovereign right of the United States unless the government waives that right unmistakably. The no-inference clause, according to the court, explicitly disclaims that intent.

The Court allowed the investigation to continue but expressed no opinion about whether any laws have been violated by the NAR. This case is different from recent actions claiming the NAR’s policies on commissions are anti-competitive.  We can expect much more litigation involving the NAR.

Representing elder clients can be tricky

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Dirt lawyers may be in the best position to protect elders in real estate transactions

Elderly persons should be treasured, not abused! And, as real estate lawyers, we may be in a particular position to guard against abuses.

Elder abuse often happens at the hands of family members or “friends” who, because of the vulnerabilities associated with age, such as mental impairment, are able to employ methods such as theft, fraud, forgery, extortion and the wrongful use of powers of attorney to separate an elderly person from property or funds.

Reflect upon the numbers of stories you have heard in your community about elderly persons falling prey to telephone scams. Those same individuals would not have succumbed in their prime. Even with all mental facilities in place, they don’t hear as well, they don’t keep up with changes in technology, and they are unable to keep up with fraud trends we all hear about every day.

Here are some signs of elder financial abuse that you may be able to detect in your office:

  • Sudden changes in an elderly person’s estate planning documents;
  • Changes made in the title to properties in favor of a “friend;
  • Home health aide, housekeeper or other person is added to the accounts of an elderly person or is receiving an assignment of proceeds;
  • Family members or trusted “friend” discourages or interferes with direct communications with an elderly person involved in a transaction;
  • The older person seems unable to comprehend the financial implications of the transaction;
  • The older person signs documents without seemingly knowing or understanding what is being signed;
  • A power of attorney is involved. I’ve told this story many times, but I know a wonderful claims attorney who called powers of attorney “instruments of the devil”. Powers of attorney are extremely useful tools in the real estate world, but we should always exercise caution when they are used, especially when an elderly person is involved;
  • Anyone seems to be forcing the elderly person to act;
  • Numerous unpaid bills may be a clue that someone is diverting the money designated for the daily living of the elderly person;
  • Promises of lifelong care in exchange for property;
  • The elderly person complains that he or she used to have money but doesn’t understand why the money is no longer available;
  • The caregiver is evasive about the specifics of the transaction in the presence of the elderly person;
  • The elderly person seems fearful or reticent to speak in front of a family member, friend, loan officer, real estate agent or anyone involved in the transaction.
  • The accompanying family member or caregiver attempts to prevent the elderly person from interacting with others.
  • The elderly person and the family member or caregiver give conflicting accounts of the transaction, the expenditures or the financial need.
  • The elderly person appears disheveled or without proper care even though he or she has adequate financial resources.

Be mindful of these common-sense suggestions when any of your real estate transactions involve elderly persons. Think of them as you would want someone to think of your parents or aunts and uncles. Be careful to protect their interests. Proceed with caution!

Elders may also be the victims of predatory lending. Elders who own their homes and have built up equity over time become targets of predatory loan originators who pressure them in to high-interest loans that they may not be able to repay. Older homeowners are often persuaded to borrow money through home equity loans for home repairs, debt consolidation or to pay health care costs. These loans may be sold as “miracle financial cures” and are often packed with excessive fees, costly mortgage insurance and balloon payments.

Always discuss transactions directly with your elderly clients. Ask them pointed questions to make sure they understand the transaction.

And, as always, employ your instincts and your common sense.

Supreme Court holds CFPB’s funding mechanism is constitutional

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The Consumer Financial Protection Bureau’s funding mechanism is constitutional, according to CFPB v. Community Financial Services Association, decided May 16.

Justice Clarence Thomas authored the 7-2 decision. Justices Samuel Alito and Neil Gorsuch dissented.

A payday lender trade association sued the CFPB in 2017, seeking to overturn a rule prohibiting debits from bank accounts and arguing that the CFPB and all its actions since 2010 were unconstitutional because of its funding structure.

The agency is housed inside the Federal Reserve and draws up to $600 million from the Federal Reserve annually. Funding was set up in this manner to insulate the CFPB from industry influence. Normal funding would include the regular appropriations process. Article 1, Section 9 of the Constitution (the Appropriations Clause) states that no money shall be withdrawn from the Treasury “but in the consequence of Appropriations made by Law.”

The association’s argument was that this deviation from the normal appropriations process gave the agency “perpetual” funding. The opinion held, “Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the Bureau’s funding meets these requirements.”

In addition to the CFPB, the Customs Service, Postal Service and revenue officers are all funded through non-annual, standing appropriations.

The dissent stated, “Unfortunately, today’s decision turns the Appropriations Clause into a minor vestige. The Court upholds a novel statutory scheme under which the powerful Consumer financial Protection Bureau (CFPB) may bankroll its own agenda without any congressional control or oversight.

From a practical perspective, I can’t imagine how difficult it would have been to undo the many investigations, rulings, and fines during the CFPB’s tenure. This decision holds that the Bureau’s actions stand.

Captain Sam’s Spit is in the news again

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This blog has discussed “Captain Sam’s Spit” in Kiawah Island three times before. Googling that picturesque name will reveal a treasure trove of news, opinion and case law involving the proposed development of a beautiful and extremely precarious tract of pristine beach property on South Carolina’s coast.

In the news, reported by WCSC- TV (Charleston), the town of Kiawah Island, the Kiawah Island Community Association, and the Kiawah Conservancy filed a breach of contract suit against KDP II, LLC, the owner of the spit. According to the reporting, the lawsuit alleges that a 2013 development agreement required KDP to deed a portion of the property to the Kiawah Island Community Association as community open space and to place all remaining undeveloped lands under a conservation easement to be held by the Conservancy.

The most recent blog discussed the 2021 Supreme Court case the latest case* in which the Court refers to the property as one of our state’s only three remaining pristine sandy beaches readily accessible to the general public. The other two beaches are Hunting Island State Park and Huntington Beach State Park. I enjoy the blessing of walking the pristine beach of Huntington Beach State Park on a regular basis, so despite having a career on the periphery of real estate development, I am in favor of maintaining these three state treasures.

The South Carolina Bar’s Real Estate Intensive seminars have included field trips to Captain Sam’s Spit, from a distance at least. Professor Josh Eagle of the University of South Carolina School of Law was an excellent tour guide, and how many opportunities do we, as dirt lawyers, have for field trips? The South Carolina Environmental Law Project, located in Pawleys Island, fights these cases. Amy Armstrong, an attorney with that entity, joined our group to explain the environmental and legal issues.

Here are greatly simplified facts. Captain Sam’s Spit encompasses approximately 170 acres of land above the mean high-water mark along the southwestern tip of Kiawah Island and is surrounded by water on three sides. The Spit is over a mile long and 1,600 feet at its widest point, but the focal point of the latest appeal is the land along the narrowest point (the “neck”), which is the isthmus of land connecting it to the remainder of Kiawah Island. The neck occurs at a deep bend in the Kiawah River where it changes direction before eventually emptying into the Atlantic Ocean via Captain Sam’s Inlet.

The neck has been migrating eastward because of the erosive forces of the Kiawah River. The “access corridor”—the buildable land between the critical area and the ocean-side setback line—has narrowed significantly in the past decade to less than thirty feet. Googling this issue will lead to active maps which show the change over time. The width of the neck is significant because the developer needs enough space to build a road. At the base of the neck is Beachwalker Park, operated by the Charleston County Parks and Recreation Commission. Our fieldtrips were conducted on that Park.

Twice before, the administrative law court (ALC), over the initial objection of DHEC, has granted permits for the construction of an extremely large erosion control device in the critical area. In both cases (citations omitted), the Supreme Court found the ALC erred. The 2021 case arose from the ALC’s third approval of another structure termed “gargantuan” by the Supreme Court—a 2,380-foot steel sheet pile wall designed to combat the erosive forces carving into the sandy river shoreline in order to allow the developer to construct the road to support the development of fifty houses. The Court again reversed and, in effect, shut down the proposed development, at least temporarily. The economic interests of an increased tax base and employment opportunities do not justify eliminating the public’s use of protected tidelands, according to the Court.

I wouldn’t be surprised to see future appellate court cases involving this property.

*South Carolina Coastal Conservative League v. South Carolina Department of Health and Environmental Control, South Carolina Supreme Court Opinion 28031 (June 2, 2021)

Court of Appeals affirms DeBordieu’s groin permit

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Photo from DeBordieu.com

South Carolina’s Court of Appeals affirmed the permit issued by DHEC to DeBordieu Colony Community Association for the construction of anti-erosion groins on DeBordieu Beach*.

In this appeal from the Administrative Law Court, South Carolina Coastal Conservation League contended that the ALC erred in finding the groins would be placed in a high erosion area, that the erosion threatened existing structures, and that the groins would not detrimentally impact the downdrift of sand to other beaches.

The Court defined a groin in footnote 2, referring to DHEC Regulations, as “a structure designed to stabilize a beach by trapping littoral drift. Groins are usually perpendicular to the short and extend from the shoreline into the water far enough to accomplish their purpose.”

The application for the permit was around 2,600 pages, and testimony was solicited by all sides from numerous experts. The Court acknowledged that while differing sides can reasonably debate methods to prevent erosion, our statutes allow the construction of new groins under specified conditions. The Court found that the ALC’s decision, based on probative, substantial, and reliable evidence in the record, is not clearly erroneous nor is it arbitrary or capricious.

An appeal to South Carolina’s Supreme Court is certainly expected in this case.

*South Carolina Coastal Conservation League v. South Carolina Department of Health and Environmental Control, South Carolina Court of Appeals Opinion No. 6058 (May 1, 2024)